McNamara v. Intercept Corporation

• Court: District Court, D. Nevada
• Decided: December 15, 2021
• Docket: 2:18-cv-02281
• Status: Unknown

Opinion

1 UNITED STATES DISTRICT COURT

2 DISTRICT OF NEVADA

3 FEDERAL TRADE COMMISSION, ) Case Nos.: 2:12-cv-00536-GMN-VCF 4 ) 2:18-cv-01813-GMN-DJA Plaintiff, ) 2:18-cv-02281-GMN-VCF 5 vs. ) 2:17-cv-02966-GMN-NJK ) 2:17-cv-02967-GMN-BNW 6 AMG SERVICES, INC., et al., ) 2:17-cv-02968-GMN-NJK 7 ) Defendants. ) ORDER1 8 ) 9 10 Pending before the Court is the Motion to Assert Interest, (ECF No. 1345), filed by 11 Defendants Kim Tucker2 and Black Creek Capital Corporation, along with Monitor Entities3 12 NM Service Corporation, BA Services, LLC, and Westfund, LLC (collectively, “Movants”).4 13 14 1 This Order addresses the Motion to Assert Interest, (ECF No. 1345), filed in Case No. 2:12-cv-00536-GMN- VCF. However, this Order will also be filed in the Ongoing Litigation cases, (Case Nos. 2:18-cv-01813-GMN- 15 DJA, 2:18-cv-02281-GMN-VCF, 2:17-cv-02966-GMN-NJK, 2:17-cv-02967-GMN-BNW, 2:17-cv-02968- GMN-NJK), because the Order has implications for those cases as well. 16 2 Kim Tucker is Defendant Scott Tucker’s ex-wife. 17 3 The Monitor Order defines “Monitor Entities” as: (a) the corporate defendants and corporate relief defendant: 18 AMG Capital Management, LLC, Level 5 Motorsports, LLC, Black Creek Capital Corporation, Broadmoor Capital Partners, LLC, Park 269, LLC; and their successors, assigns, affiliates, and subsidiaries; (b) BA Services 19 LLC, C5 Capital LLC, DF Services Corp., DFTW Consolidated [UC] LLC, Impact BP LLC, Level 5 Apparel LLC, Level 5 Capital Partners LLC, Level 5 Eyewear LLC, Level 5 Scientific LLC, NM Service Corp. (f/k/a/ 20 National Money Service), PSB Services LLC, Real Estate Capital LLC (f/k/a/ Rehab Capital I, LLC), Sentient Technologies, ST Capital LLC, Westfund LLC, Eclipse Renewables Holdings LLC, Scott Tucker Declaration of 21 Trust, dated February 20, 2015, West Race Cars, LLC, and Level 5 Management LLC, and their successors, assigns, affiliates, and subsidiaries; and (c) any other entity identified by the Monitor that, upon motion granted 22 by the Court, is found to be a proper Monitor Entity because, for example, such entity holds Assets of a Defendant or existing Monitor Entity, or is owned or controlled by a Defendant or Monitor Entity. (Monitor 23 Order 3:17–4:6, ECF No. 1099).

24 4 Movants Motion attempts to assert an interest in five other cases (the “Ongoing Litigation”) currently pending before this Court. (See infra n.3). As such, Movants also filed Notices of the present Motion in each of the five 25 cases. (See Notice, McNamara v. Charles Hallinan, et al., No. 2:17-cv-02966-GMN-NJK, ECF No. 170); (Notice, McNamara v. Linda Hallinan, et al., No. 2:17-cv-02967-GMN-BNW, ECF No. 170); (Notice, McNamara v. Patten, et al., No. 2:17-cv-02968-GMN-NJK, ECF No. 117); (Notice, McNamara v. Stealth 1 The Motion asserts that Movants, and specifically Kim Tucker, are the proper parties to 2 prosecute the Ongoing Litigation5 and to pursue the collection of the Outstanding Judgments.6 3 For the reasons discussed below, the Court DENIES Movants Motion to Assert Interest. 4 I. BACKGROUND 5 This action was brought by the Federal Trade Commission (“FTC”), asserting that the 6 “high-fee, short-term payday loans” offered by former Defendants AMG Services, Inc., SFS, 7 Inc., Red Cedar Services, Inc., and MNE Services, Inc. violated section 5 of the Federal Trade 8 Commission Act of 1914, 15 § U.S.C. 45(a)(1), the Truth in Lending Act of 1968, 15 U.S.C. § 9

10 Power, LLC, No. 2:18-cv-01813-GMN-DJA, ECF No. 80); (Notice, McNamara v. Intercept Corp., et al., No. 11 2:18-cv-02281-GMN-VCF, ECF No. 75). There have been numerous responses and replies from various parties to the Motion and the Notices. The Court declines to list them all here. 12 5 “Ongoing Litigation” refers to the ongoing matters brought by Court-appointed Monitor Thomas McNamara, 13 pursuant to the authority granted to him in the Monitor Order, (ECF No. 1099), to recover debts owed to Scott Tucker and the Monitor Entities and clawback fraudulent transfers and ill-gotten gains. There are currently five 14 pieces of Outstanding Litigation: (1) McNamara v. Charles Hallinan, et al., No. 2:17-cv-02966-GMN-NJK (D. Nev.); (2) McNamara v. Linda Hallinan, et al., No. 2:17-cv-02967-GMN-BNW (D. Nev.); (3) McNamara v. 15 Patten, et al., No. 2:17-cv-02968-GMN-NJK (D. Nev.); (4) McNamara v. Stealth Power, LLC, No. 2:18-cv- 01813-GMN-DJA (D. Nev.); and (5) McNamara v. Intercept Corp., et al., No. 2:18-cv-02281-GMN-VCF (D. 16 Nev.). In this Court’s Second Amended Order, (ECF No. 1338), “Ongoing Litigation” additionally included McNamara v. Selling Source, LLC et. al., No. 2:17-cv-02969-GMN-DJA (D. Nev.), but the Monitor has since 17 voluntarily dismissed that case. Accordingly, for the purposes of this Order “Ongoing Litigation” refers only to the five open cases. 18 6 “Outstanding Judgments” refer to four judgments obtained by Court-Appointed Monitor Thomas McNamara 19 pursuant to the authority granted to him by the Monitor Order, (ECF No. 1099), that have not yet been fulfilled. The Outstanding Judgments include: (1) a judgment from this case, (ECF No. 1291), in the amount of 20 $2,416,666.36 against David Feingold, Dylan, Jagger Investment Co., Inc., Homeowners Realty, LLC, UMR Building LLC, and United Material Recovery, LLC, (collectively, “Feingold Parties”) (see ECF Nos. 1290, 21 1291); (2) a judgment out of this Court, (Case No. 2:18-cv-01336-JCM-CWH), on behalf of Black Creek Capital Corporation, in the amount of $2,000,000 plus post-judgment interest against WhamTech, Inc.; (3) a judgment 22 out of the District Court of Johnson County, Kansas, (Case No. 18-cv-0335), on behalf of Westfund, LLC, in the amount of $952,104.47 plus prejudgment interest of $627,860.00 through July 1, 2019, and interest accruing 23 since at $528.95 per day against United Resource Holdings, LLC, Kendallwood Senior Properties, LLC, John T. Julian, Linda L. Julian, and Paul K. Thoma; and (4) a judgment out of the District Court of Johnson County, 24 Kansas, (Case No. 18-cv-0335), on behalf of Westfund, LLC, in the amount of $516,928.33 plus prejudgment interest of $340,885.52 through July 1, 2019, and interest accruing since at $287.18 per day against United 25 Resource Holdings, LLC, Milan Development Group, LLC, John T. Julian, and Paul K. Thoma. (See Monitor’s Statement 3:1–23, ECF No. 1333). 1 1601(a), and Regulation Z, 12 C.F.R. § 1026(a). (Am. Compl. 15:1–20:6, ECF No. 386). 2 Defendant Scott Tucker controlled, founded, or was president of a host of short-term payday 3 loan marketing and servicing companies, including, inter alia, National Money Service, Inc., 4 CLK Management LLC, and Universal Management Services, Inc. (Exs. 1–2, 4–5, 14 to 5 Singhvi Decl., ECF Nos. 908-1–2, 4–5, 14). 6 On September 20, 2019, the Court granted summary judgement in favor of the FTC, 7 awarding both injunctive and monetary equitable relief based on the long-held Ninth Circuit 8 precedent that Section 13(b) of the Federal Trade Commission Act, 15 U.S.C. § 53(b), permits 9 a panoply of equitable remedies, including monetary equitable relief in the form of restitution 10 and disgorgement. See Pantron I Corp., 33 F.3d at 1103 n.34; F.T.C. v. Figgie Int’l, Inc., 994 11 F.2d 595, 606–08 (9th Cir. 1993); H.N. Singer, 668 F.2d at 1113; (Order 19:22–26:4, ECF No. 12 1057). Defendants appealed the FTC’s monetary equitable relief award. (Notice of Appeal, 13 ECF No. 1097). 14 While the Ninth Circuit affirmed this Court’s Order, the Supreme Court reversed, 15 holding that “[section] 13(b) as currently written does not grant the [FTC] authority to obtain 16 equitable monetary relief.” AMG Capital Management, LLC v. FTC, 141 S. Ct. 1341, 1352 17 (2021); FTC v. AMG Captial Management, LLC, 910 F.3d 417, 426–27 (9th Cir. 2018); FTC v. 18 AMG Services, Inc., No. 2:12-cv-00536-GMN-VCF, 2016 WL 5791416, at *11–13 (D. Nev. 19 Sept. 30, 2016); (Order, ECF No. 1057). The Ninth Circuit subsequently vacated its 20 affirmation of the FTC’s monetary award, reversing this Court’s Order and remanding for 21 further proceedings consistent with the Supreme Court’s opinion. See FTC v. AMG Capital 22 Management, LLC, 998 F.3d 897, 897–98 (9th Cir. 2021). On remand, the Court amended its

23 original Order to deny the FTC’s request for equitable monetary relief. (Second Am. Order 24 22:18–20, ECF No. 1338). 25 1 During the pendency of Defendants’ appeal the parties jointly moved to (1) stay the 2 FTC’s collection of the monetary relief award; (2) freeze Defendants’ assets; and (3) appoint a 3 monitor, Thomas W. McNamara (“the Monitor”), to “oversee the asset freeze and the orderly 4 sale of certain assets the Tucker Defendants7 have agreed to liquidate while the appeal is 5 pending.” (See Order Appointing Monitor (“Monitor Order”) 1:14–15, ECF No. 1099). The 6 Monitor’s purpose was to “preserve the status quo during the pendency of the appeal, and to 7 facilitate the liquidation of assets that absent such liquidation would waste in value during the 8 pendency of the appeal.” (Id. 2:6–8). Additionally, the Monitor initiated numerous lawsuits 9 and settlement negotiations to recover debts owed to Scott Tucker and the Monitor Entities and 10 clawback fraudulent transfers or ill-gotten gains. (Monitor’s Final Report 9:9–13, ECF No. 11 1364). As a result of the Monitor’s efforts, the Monitorship Estate currently holds 12 $14,452,645.57 in net cash. (See Final Status Report 20:10–12, ECF No. 1364). 13 The parties agree that the Monitor’s authority to act on behalf of the Monitorship Estate 14 ended with the conclusion of the appeal. Accordingly, the Court’s Second Amended Order 15 provided instructions for the orderly wind-down of the Monitorship Estate. Most of the assets 16 in the Monitorship Estate, including the net cash, are subject to a Preliminary Order of 17 Forfeiture (“POOF”) in the District Court for the Southern District of New York (“SDNY”) in 18 relation to Scott Tucker’s criminal money judgment of $3.5 billion. However, some 19 Monitorship assets, including the Ongoing Litigation and the Outstanding Judgments at issue 20 here, are not covered by SDNY’s POOF. (See supra n.3–4). To affect the wind-down of these 21 assets, the Court ordered: 22

23 24 7 The Monitor Order defines “Tucker Defendants” as: Scott A. Tucker, AMG Capital Management, LLC, Level 5 Motorsports, LLC, Black Creek Capital Corporation, Broadmoor Capital Partners, LLC, and their successors, 25 entities, assigns, affiliates, and subsidiaries. (Order Appointing Monitor (“Monitor Order”) 4:20–22, ECF No.1099). 1 A. For the Ongoing Litigation, the stays in each of these matters are hereby lifted and any interested parties shall have thirty (30) days from the date of this 2 Order to appear in one or more of the Ongoing Litigation to assert an interest in such case(s). If no movant comes forward in one or more of the Ongoing 3 Litigation matters within thirty (30) days of this Order, the Monitor shall file 4 dismissals in such case(s). . . . 5 C. For the Outstanding Judgments, any interested party shall have thirty (30) 6 days from the date of this Order to appear before the Court and assert an interest in one or more of the Judgments. If a movant does not appear within 7 such time, Defendants, or any one of them, shall have an additional thirty (30) 8 days in which to take steps to effectuate an assignment of the Outstanding Judgments. 9 10 (Second Am. Order 34:1–16, ECF No. 1338). 11 On October 3, 2021, the Movants appeared in each case of the Ongoing Litigation and 12 filed a Notice of Asserted Interest. (See Notice, McNamara v. Charles Hallinan, et al., No. 13 2:17-cv-02966-GMN-NJK, ECF No. 170); (Notice, McNamara v. Linda Hallinan, et al., No. 14 2:17-cv-02967-GMN-BNW, ECF No. 170); (Notice, McNamara v. Patten, et al., No. 2:17-cv- 15 02968-GMN-NJK, ECF No. 117); (Notice, McNamara v. Stealth Power, LLC, No. 2:18-cv- 16 01813-GMN-DJA, ECF No. 80); (Notice, McNamara v. Intercept Corp., et al., No. 2:18-cv- 17 02281-GMN-VCF, ECF No. 75). Additionally, the Movants filed the present Motion, which 18 asks the Court to “order the Monitor to assign the Outstanding Judgments and the claims 19 underlying the Ongoing Litigation matters to Kim Tucker [or one or more of the Monitorship 20 Entities now under Kim Tucker’s control].” (Mot. Assert Interest 9:22–28, ECF No. 1345).8 21 22 23

24 8 Movants did not assert an interest in McNamara v. Selling Source, LLC et. al., No. 2:17-cv-02969-GMN-DJA 25 or the Monitor’s Motion to Approve Settlement Agreement with Ward Katz and Related Entities, (ECF No. 1307). Thus, the Monitor voluntarily dismissed McNamara v. Selling Source and withdrew the Motion to Approve Settlement Agreement. 1 II. DISCUSSION 2 In their Motion, the Movants attempt to assert an interest in the Ongoing Litigation and 3 Outstanding Judgments by petitioning the Court to assign the Monitor’s interest in each case 4 and judgment to Kim Tucker. (Mot. Assert Interest 9:18–28). To support this contention, the 5 Movants explain that Kim Tucker’s divorce decree grants her control over the Monitorship 6 Entities and the power to pursue any claims for monies owed to those entities. (Id. 3:23–4:5). 7 The Court will discuss the disposition of the Ongoing Litigation and Outstanding Judgments 8 individually below. 9 A. Ongoing Litigation 10 Each case in the Ongoing Litigation was initiated by the Monitor to recover money 11 owed to one of the following Monitorship Entities: BA Services, LLC; Black Creek Capital 12 Corporation; Westfund, LLC; NM Service Corp.; C.B. Service Corporation; and other 13 unidentified Monitorship Entities. The Movants claim that they are “the proper parties to 14 continue the pursuit of [the Ongoing Litigation] matters.” (Mot. Assert Interest 3:21). 15 However, the Court finds that the Movants have established neither a valid interest in the 16 Ongoing Litigation, nor standing to continue litigating these cases. 17 First, as discussed above, the Movants base their interest in the Ongoing Litigation 18 entirely on the divorce decree between Scott Tucker and Kim Tucker, which they claim 19 bestows control of all Monitorship Entities, and the authority to pursue litigation on their 20 behalf, on Kim Tucker. (Mot. Assert Interest 3:23–4:5). However, this divorce decree does not 21 necessarily establish that Kim Tucker has a valid interest in, or power over, the Monitorship 22 Entities at stake in the Ongoing Litigation. For example, the divorce decree provided by the

23 Movants includes only a handwritten declaration signed by Scott Tucker on October 10, 2019, 24 which vaguely states “I Scott Tucker am responsible for all debts incurred during the 25 marriage[.] [A]ll assets obtained during the marriage I grant to Kim Tucker[.]” (Divorce 1 Decree, Ex. C to Movant’s Reply, ECF No. 1356-3). However, this declaration fails to 2 specifically identify any Monitorship Entities, or confirm that each entity was still within the 3 marital estate at the time that Scott Tucker attempted to transfer his assets, or address the effect 4 of the SDNY’s criminal money judgment on Scott Tucker’s ability to transfer his assets in 5 general. Additionally, Movants fail to explain how an apparent grant of marital assets to Kim 6 Tucker simultaneously creates the authority to pursue litigation on behalf of the business 7 entities within the Monitorship Estate. In sum, the divorce decree alone, without consideration 8 of these other issues, does not unequivocally establish that Kim Tucker has unbridled authority 9 over the Monitorship Entities. The Court, therefore, is not satisfied that Kim Tucker, or any of 10 the other Movants, has a valid interest in the Ongoing Litigation. 11 Further, even if the Movants were able to establish a valid interest, they have not 12 identified any legal authority that would establish Kim Tucker as the proper party to continue 13 pursuing this litigation in place of the Monitor. The Monitor is a specialized entity, created as 14 an agent of the Court, with the specific purpose of preserving the value of assets in the 15 Monitorship Estate during the pendency of Defendants’ appeal, and he initiated the Ongoing 16 Litigation under this mandate. (See Monitor Order, 10:12–16, 12:1–15:22, ECF No. 1099). 17 The Movants have failed to provide any precedent or other case law supporting their claim that 18 they may step into the shoes of the Court-appointed Monitor and pursue the cases that he 19 initiated pursuant to his authority under the Monitor Order. Therefore, Movants have not 20 demonstrated that they are an adequate substitute for the Monitor in the Ongoing Litigation. 21 Finally, even if the Movants had a valid interest and were proper parties to continue the 22 Ongoing Litigation, they failed to invoke any procedural mechanism or rule that would allow

23 them, as outside third parties, to substitute themselves for the Monitor. Accordingly, the Court 24 denies the Movant’s Motion with respect to the Ongoing Litigation. Since no party has 25 asserted a valid interest in the Ongoing Litigation, pursuant to this Court’s Second Amended 1 Order, the Monitor shall dismiss the remaining five cases. (See Second Am. Order 34:1–16, 2 ECF No. 1338). 3 B. Outstanding Judgments 4 The Monitor obtained four Outstanding Judgments on behalf of the following 5 Monitorship Entities: Black Creek Capital Corporation, Westfund, LLC, and other unidentified 6 Monitorship Entities. (See supra n.4). As above, the Movants claim that the Monitor should 7 assign his interest in the Outstanding Judgments to Kim Tucker. (Mot. Assert Interest 9:23–24). 8 However, for the reasons discussed in the prior section, the Court finds that Kim Tucker has not 9 asserted a valid interest in the remaining assets from the Monitorship Estate. Even though no 10 other party has asserted a valid interest in the Outstanding Judgments, pursuant to this Court’s 11 Second Amended Order, the Monitor’s interest in the Outstanding Judgments remains 12 assignable. (See Second Am. Order 34:1–16). Accordingly, the Monitor shall assign his 13 interest in each of the Outstanding Judgments to the Monitorship Entity on whose behalf he 14 was acting when he obtained each judgment.9 15 // 16 // 17 // 18 // 19 // 20 // 21 // 22

23 9 Several entities against whom the Outstanding Judgments are entered argue that their judgments are voidable as a result of the Supreme Court’s decision in AMG Capital Management, LLC v. FTC, 141 S. Ct. 1341, 1352 24 (2021). (See Resp., ECF No. 1349); (Resp., ECF No. 1353). However, only the issuing Court can void a judgment. In the present case, this Court only entered one of the Outstanding Judgments, against the Feingold 25 Parties, (see J., ECF No. 1291), and thus, will not consider any arguments concerning voidability from the other three Outstanding Judgments. The Feingold Parties have moved to void the judgment against them, (see Mot. Vacate, ECF No. 1341), and the Court will address that Motion by separate Order. 1 III. CONCLUSION 2 IT IS HEREBY ORDERED that the Movants’ Motion to Assert Interest, (ECF No. 3 1345), is DENIED. 4 IT IS FURTHER ORDERED that Monitor shall file dismissal notices in the remaining 5 open cases of the Ongoing Litigation. 6 IT IS FURTHER ORDERED that the Monitor shall assign his interest in each of the 7 Outstanding Judgments to the entity on whose behalf the Monitor was acting when he pursued 8 each judgment. The Monitor shall file on the docket by January 14, 2022, proof of assignment 9 and proof that the assignee has been notified of the assignment. 10 DATED this __1_5__ day of December, 2021. 11 12 ___________________________________ Gloria M. Navarro, District Judge 13 UNITED STATES DISTRICT COURT 14 15 16 17 18 19 20 21 22 23 24 25